The aggregate funding ratio of defined benefit (DB) pension schemes in the UK reached a record high of 118.9 per cent at the end of May, up from 114 per cent a month prior, according to the Pension Protection Fund (PPF) 7800 Index.

The aggregate surplus of the 5,215 schemes in the index was estimated to have increased by £55.4bn in May, from £206.2bn at the end of April 2022 to £261.6bn at the end of May 2022, with assets totalling £1,642.6bn and liabilities of £1,381bn.

It was also revealed that 1,450 schemes were in deficit and 3,765 schemes in surplus, with the aggregate deficit of the schemes in deficit at the end of May found to be £28.2bn, down from £47.8bn at the end of April.

In response to the update, Buck head of retirement consulting in the UK Vishal Makkar urged caution, suggesting that, for some scheme sponsors, the outlook “may not be so positive”.

Makkar pointed to the announcement from the ONS of the GDP’s fall for a second consecutive month in April and suggested that high inflation and the cost-of-living crisis could continue to negatively impact industries like hospitality.

Trustees were also the subject of Makkar’s cautions as he pointed to the delay to the new DB Funding Code, which is now not due until September 2023, and the subsequent lack of certainty could add to the challenges currently facing trustees.

PPF chief finance officer and chief actuary Lisa McCrory commented: "Last month’s 7800 Index set two new records – the highest aggregated funding ratio and the lowest number of schemes in deficit on record.

“This continues the trend of improving funding driven by rising gilt yields. Whilst it’s positive to see these ongoing improvements in scheme funding, we are mindful that the impacts for individual schemes will be varied and that some schemes remain materially underfunded.

“It is important that trustees are monitoring their scheme’s funding position and understand the risks and opportunities arising from the current environment."

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